Most economists had expected an improvement in the trade deficit in July after it widened 16 percent in June, but the actual deficit was slightly below the CBS Marketwatch consensus forecast of $52.2 billion.

The trade gap in June was revised down slightly to $55.0 billion, compared with the initial estimate of $55.8 billion, but is still the highest deficit on record.

After the first seven months of 2004, the trade deficit is on track to surpass the record $496.5 billion set last year. The deficit for the first six months is $339.0 billion, ahead of last year's pace of $289.6 billion.

Imports declined for the first time in eleven months, falling1.4 percent to $146.0 billion.

Exports rose 3.0 percent to $95.9 billion to their second highest level on record after suffering their largest drop since September 2001 in the previous month.

The U.S. trade deficit with China widened to $14.9 billion in July compared with $11.4 billion in the same month last year.

The U.S. also set a trade deficit with Germany in July.

Imports of goods alone fell 1.5 percent to $122 billion. The drop in imports was widespread. Most major categories fell, with only auto imports up 2.1 percent.

Exports of goods alone rose 4.3 percent to $67.5 billion. Exports of autos and auto parts set a new record of $7.6 billion. Exports of civilian aircraft jumped 41.2 percent to $1.9 billion.

Oil

A drop in oil imports contributed to the decline in imports in July.

The U.S. imported 318.8 million barrels of crude oil in July, or 10.3 million barrels per day, down from 346.5 million or 11.6 million barrels, in June.

The average price per barrel of oil fell to $33.28 in July from $33.76 in June. This is the first decline in the average price in eight months.

Separately, the Labor Department reported that August PPI fell 0.1 percent and the core rate was also down 0..1 percent. See full story.

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